Proof of delivery for services

2CO requires it to prevent chargebacks

[NazaretH]

We sell software and installation/modification services. Software is sent via email. Since the software has open source, we can not discontinue it, as you may guess, so once the software is sent, we can't control its use. Some of our customers buy the software, use it, and in a few months require a chargeback from 2CO, which, in turn, doesn't bother to protect us, and issue chargebacks every time buyer asks for the one. There should be a way to prevent this. This is a high-price item (almost 1000$ per license), every chargeback leads to serious losses. As a reason of chargeback 2CO stated such things as:
- product not as advertised
- customer could not use the product
- product not as expected (!)
- reason not known (!)

... and all that guys who required and received chargeback continue using our software now and run sites powered by our software!

Please suggest how we can prevent ourselves from this? We require each customer to sign a license agreement and fax it to us, but 2Co doesn't seem to care. they require "proof of delivery"... I just can't get how I can obtain the one? this is service, and nobody sends a box via mail or something... Please, share your opinions, maybe there is some kind of special form of proof of delivery which can be filled by our customers and faxed to us? Any ideas?

[AW_Learner]

Get your own merchant account. Using a 3rd party is like letting idiots run your return policy for you. Fire them.

[NazaretH]

We work and live in Kyrgyzstan - our banks do not open merchant accounts and do not even know about such phenomenon, so ... is it possible to open a merchant account in US bank by non-US individual or company from abroad? Any experience with opening such account from overseas in any other country?

[wackal]

you'll probably have the same problems with a merchant account because the banks don't bother to look into any chargeback. the customer can say he never authorized purchase most banks automatically give you a chargeback. you should look into developing some type of product activation / deactivation into your software. that way if the customer does a chargeback, you can shut off their software.

[digitalv]

You know one thing you could do is ship the software out on CD in addition to offering the online delivery. Use FedEx with delivery confirmation - that will get a signature every time.

Sure you may get a customer or two who refuses the delivery, but most of them will accept it and sign and then you've got them. You can log on to the FedEx website and print the confirmation page, with their signature on it, and use that as proof whenever you need it. It's worth the extra few bucks it costs to burn a CD and send it out because you'll avoid charge-backs.

[AW_Learner]

I don't know about the US Merchant accounts. I probably don't qualify for any of them myself.

I think there are other 3rd party merchant services that specialize in only software selling digitally. I have not heard any reviews on them but I would think that they'd have a better policy dealing with software and more security.

[regsoft.com...] is one of them.

They say " before RegSoft.com refunds the customer, RegSoft.com provides the vendor with an opportunity to work out the problem with the customer."

They'll even deliver the extra CD hard version for you and give you $3 extra to do so.
[regsoft.com...]

Or: [esellerate.net...]

There is also [digibuy.com...]

They seem a little more expensive though.

[shareit.com...]

[v-share.com...]

I like the idea of being able to remotely deactivate the people's authorization to use the software. But it sounds like it is just open source code and not contained within a software product, so they'd already have it. Best to go with a merchant who at least is more fair in the refund process. You still can't prevent charge backs that are done directly to the credit provider but you can fight them.

[NazaretH]

Yes, it is PHP-software with open source, so deactivation is impossible. We think on hard-copy delivery idea, although it would make the whole after-purchase process slower and more complicated.

What if we ask for customers to fax us a signer "proof of delivery" form BEFORE we send the software via email? What do you think? (seems to be a little tricky, as they might hesitate to sign proof of delivery without delivered product :( )

[digitalv]

Yes, it is PHP-software with open source, so deactivation is impossible. We think on hard-copy delivery idea, although it would make the whole after-purchase process slower and more complicated.

What if we ask for customers to fax us a signer "proof of delivery" form BEFORE we send the software via email? What do you think? (seems to be a little tricky, as they might hesitate to sign proof of delivery without delivered product :( )

The hard copy is still the best way. You still give them the product through e-mail/immediate download/however you do it right now. Don't even MENTION that you are going to ship them a CD, just do it. They will sign for it when it arrives, and you'll have your required delivery confirmation via the FedEx signature.

[Mr Bo Jangles]

Have a look at Kagi as your third party payment provider for the following reasons:
a) they are marginally cheaper than 2CO I believe,
b) they have an arrangement with a couple of cheap CD providers and your software can be automatically (or by you) despatched by CD - *very economically*.

I've also heard that SWREG [swreg.org...]
is a good provider of long standing (as is Kagi).
SWREG have a Yahoo Group that anyone can join and get a feel about the company and who runs it (a pretty smart cookie, who has high principals - IMO).

[I have no affiliations with any of these companies - except I have used Kagi in past as a customer]

[NazaretH]

OK, looks like sending a hard copy is a good way, but does it protect from chargebacks with a reason like "product not as advertised"? It's a common thing that customers order the software (set of php scripts), then require installation and minor modifications, then they try to figure out how it works asking lots of questions, and finally they decide that the whole thing is too complicated for them and require chargeback via their bank simply because they can't make use of the software! It's just ridiculous sometimes how easy 2CO issues chargebacks to them and we even have to pay a 29$ fine :(

Any ideas on how to prevent "not as advertised", "could not make use of", "doesn't meet expectations" types of chargebacks?

[blaze]

Have them pay by cheque / money wire / western union.

If you don't want to do that, then you have to suffer the chargebacks, there is no way around it. And for good reason, this is why people use credit cards.

[Marcia]

I've heard of Kagi for years; a lot of graphic artists use them for payment processing.

[Mr Bo Jangles]

I've heard of Kagi for years; ....

yes, been around since Adam lugged his PC (Mac?) aboard the Ark *_*

[digitalv]

OK, looks like sending a hard copy is a good way, but does it protect from chargebacks with a reason like "product not as advertised"? It's a common thing that customers order the software (set of php scripts), then require installation and minor modifications, then they try to figure out how it works asking lots of questions, and finally they decide that the whole thing is too complicated for them and require chargeback via their bank simply because they can't make use of the software! It's just ridiculous sometimes how easy 2CO issues chargebacks to them and we even have to pay a 29$ fine :(

Any ideas on how to prevent "not as advertised", "could not make use of", "doesn't meet expectations" types of chargebacks?

You have to understand that sometimes there are legitimate reasons, and that's one of them. If I buy something and it doesn't do what I want it to do, I'm going to ask for a refund - if you don't give it to me, I WILL charge it back. You can't make it impossible for your customers to get their money back, that makes you a crook ;)

So there really isn't any way to prevent these type of charge-backs, however there are things you can do to curb them. First, you still want to ship out a CD but you also want to offer a 30 day money back guarantee but include the stipulation that the software CD must be shipped back to you. If it's within the first 30 days and the customer wants a refund just give it to them - it sucks but it's better than paying a charge-back fee and having it reflect negatively on your account. But only after they've returned the CD.

If they don't ship the CD back and charge-back the purchase, you can use this fact and dispute it. You can prove you shipped them the merchandise - they cannot prove they shipped it back. Also point out your return policy, that you had no contact from the customer saying they were having a problem, the customer never asked for a refund (and HAD they asked for a refund you would have given it to them), etc. Make yourself look like the good guy to the merchant because you ARE. It's not guaranteed, but it will help you win more than you have been.

There is more fraud committed online by BUYERS than sellers. Banks know this and love it because they profit from it. Until we stop banks from profiting from charge-backs, it's going to get easier and easier for people to do it.

[CernyM]

Its become more and more common for merchants (especially in the B2B space) to require their customers to send them a signed credit card authorization to hold in their account.

I picked up a piece of software specific to my industry and before the vendor would release the validation codes to allow it to work, I had to fax him a signed credit card authorization.

I'm guessing that helps him against chargebacks. I wonder if it also allows him to use the more advantageous terminal rates, rather than the usurous card-not-present rates.

[Symbios]

I think its about time the banks started fining people that claim chargebacks when they have received the goods, some are criminals and deserve prosecution.

[CernyM]

How is the bank supposed to figure out who is trying to defraud who?

[Symbios]

When you have evidence of delivery and a customer puts in a chargeback claiming they never got the item even when opresented with the evidence then in my book thats a clear case of fraud, some claim chargebacks as a way of life so we then have repeated fraud.

[CernyM]

So, if I have your VISA card number, and decide to charge you $100 and send an empty box to you via UPS, you should have no recourse?

The credit card companies aren't cops, and they aren't going to try and figure out who is defrauding who.

They've made a policy decision that they basically always side with the customer on card not present transactions.

The credit card companies unwillingness to deal with the issue doesn't preclude you from filing civil suits with the courts, who are in the business of determining the facts of a case.

[JenniferL]

A civil suit isn't going to help a them when their merchant account provider drops them due to excessive chargebacks. The banks SHOULD NOT be making a profit on chargebacks! Making a profit removes their incentive to try to truly get to the bottom of the matter. One time I had a customer order 2 items, each going to a different state. One item was delivered within 4 days, the other was due to be delivered 2 days later. This customer had both tracking numbers. Well, since the other product was not delivered the same day as the first one, he started chargeback proceedings - and he never even tried to contact us!

[derekwong28]

We have shipped thousands of non-trackable parcels without ever getting a chargeback for non-delivery.

I suspect that you are dealing not with lying customers but with true credit card fraud. Having proof of delivery will simply proof that the thieves have received your goods.

Downloadable software is particularly susceptible to credit fraud. Most of the time, this is done with a hacked US credit card for shipment to a developing country.

I would recommend that you carry out a reverse ip check on every single order to see where it orginated from. If it does not match the country of the invoice address, you should cancel and refund this order.

You have really got to control this situation. It is not only the $29 chargeback fee. If your chargebacks pile out, 2CO or any other processors may terminate your account.

[paulroberts3000]

Yes, it is PHP-software with open source, so deactivation is impossible. We think on hard-copy delivery idea, although it would make the whole after-purchase process slower and more complicated.

you might want to look at Zend Encoder
[zend.com ]
or the Zend SafeGuard Suite
[zend.com ]

which will allow you to protect your php code, there are also open source alternatives as well, have a look on google

Paul

[gazza]

If there is a way you can bind the software for use to a single IP or maybe create a complied programme that acts as a server of sorts that would allow you to control the software remotely - like a backdoor - for those that institute chargebacks. (Don't tell me that it is illegal since Microsoft does something similar.) If it is also bound to a single IP they would need to contact you if they decide to change IP. Stops them doing a chargeback since they would lose support. Of course you can't tell them about the backdoor. Migrate some of the essential functions to the complied programme so they buyers can't simply commment it out of the phpcode.

[wackal]

maybe you could redo your business model so that you host all php pages and offer subscriptions to customers. that way if payment is fraudulent, subscription can simply be terminated.

[digitalv]

maybe you could redo your business model so that you host all php pages and offer subscriptions to customers. that way if payment is fraudulent, subscription can simply be terminated.

Oh come on, give me a break! He's selling software ... I would never buy from him if I couldn't host the content on my own servers, that would just be a waste of money. The problem here is dealing with people who break the law, not changing your product/business model so your buyers don't own what they're paying for, jeeze.

[blaze]

Speaking as someone who sells software, both hostable and not hostable, I actually have had to think long and hard to develop a business model that deals with providing 'source code' or not.

However I am usually less worried about chargebacks and more worried about theft of IP rights.

I guarantee you if are dealing with people who are fraudulently causing chargebacks, then you are most likely dealing with people who would have absolutely no problem giving away / reselling / stealing your IP rights.

[wackal]

digitalv, you may not want to buy software that you can't host on your own server, but there are many people / companies who would be willing to do this. My last job was with a company that designed human resources software and they had over a million a year in revenue following this model, so it can be very successful. there are always pros and cons to doing anything, but in this case he seems to be losing a lot of money from chargebacks, so it seems he needs to do something drastic if he wants to remain in business.

[NazaretH]

Well, we also have a hosted solution, which is way less popular - everyone wants an open PHP source, with which they can tweak and play.

Thank you very much for so many valuable suggestions - I think we will try a combination of different signed/faxed documents and an encrypted module used to stop fraudsters. This wouldn't work too well against PHP-savvy people, but our problem is mostly with different kind of people.